POLICY/FRIDAY FUNNY: Controlling Health Care Costs From the Bottom Up, By Michael L. Millenson

THCB regulars know that we love Michael Millenson, even if he is a swiftboater! Like some of these very vigorous THCB commenters, he’s been thinking a little about transparency!

News item: The Bush administration says it will publish the prices Medicare pays for common procedures in order to encourage comparison shopping. A private Web site immediately began posting some hospital prices. Mr. McClellan, is it? You’re here for the… ….colonoscopy. The Internet Special. I believe it’s $1,299.95 through the end of this week.

Quite right. As I’m sure you know, many people are still a bit squeamish about the idea of a tube being inserted up their…lower intestine, so we’re offering a real “bare bottom” price, if you get my drift. Before we begin, though, there are a few questions I need to ask. First of all, would you like anesthesia?

Don’t I need anesthesia? Mr. McClellan, we don’t believe it’s our role to dictate to consumers what they “need.” Should you wish to decline anesthesia, we will provide you with a set of headphones, loud music and a shiny new bullet to place between your teeth. However, in that case, we recommend strongly that you select the “extra-narrow gauge” endoscope equipment package. Endoscope? The tube that we put up your… Umm, I get the picture. But I’m still a little confused about the anesthesia not being included.

When you fly coach, Mr. McClellan, do you still expect the airline to provide you with a lavish meal? Our hospital will never compromise on your safety, but surely you cannot expect that in today’s competitive environment we will subsidize your comfort. I apologize for even mentioning it. How much does anesthesia cost? That depends on how long you would like to be sedated. We have very reasonable prices on “deep-sleep” packages that come in 15-minute units. You the empowered consumer decide how long you want to be sedated. We also offer the “all you can sleep” option, where we keep you sedated from just before the procedure starts until your doctor is totally finished. We think of this as being analogous to buying the full tank of gas at the car rental counter. Most of our customers believe the peace of mind this option provides is well worth the small extra expense, particularly if their colonoscopy takes longer than expected. I certainly agree with that. By the way, how long does a colonoscopy take? It varies, but with Dr. Hoover, about forty-five minutes. Dr. Hoover? Dr. Hoover comes standard with the colonoscopy package you selected. Quite frankly, since he retired from full-time practice a couple of years ago, the other physicians have found it close to impossible to match his fee. Naturally, at this price we can’t allow any substitutions. Now, if you don’t have any questions you’d like to ask me, I think we can begin. I do have just one question. If during my colonoscopy Dr. Hoover discovers a suspicious growth that might be cancerous, what happens next? Unfortunately, our hospital has found that it isn’t really profitable to get involved in the “post-surgical” part of the business. However, one of our customer service representatives will be delighted to provide you with some shopping tips on “pathology labs.”


Copyright 2006, Michael L. Millenson. Michael is an author, health-care consultant and visiting scholar at Northwestern University’s Kellogg School of Management. He can be reached at: m-millenson@northwestern.edu <b<

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15 replies »

  1. Controlling costs from the bottom up as presented is humorous but unfortunately it also is very sobering. Almost everyone’s initial approach is to reduce the amount paid to the professional for the services rendered. Done in the vacuum, this may seem appropriate but in reality it has only a small impact on the total cost.
    The Medicare program began a process to try and define costs by implementing its DRG program as well as a Medicare reimbursement rate for professional services. Unfortunately they did not carry it out to its logical conclusion and even when it tried, their models were fraught with error. Even private insurers failed in the same attempt. A few examples suffice when one looks at what has transpired.
    Coronary artery bypass surgery can easily be bundled both with the hospital and professional charges for a reasonable length of stay. When Medicare did it, its lowest value was 50% greater than that of major physician managed care operation in this nation’s most populace State. When the insurer attempted the same, it neglected, failed to include or was unable to include anesthesia and other commonly used specialty services associated with the procedure and hospital stay. The result of the omissions were a doubling of their per case rates. A large number of hospital services and procedures can be effectively bundled and costs addressed but they require the expertise of professionals to define the included services and not actuaries or accountants.
    Controlling costs from the bottom up has to mean more than paying the physician less, it has to look at the appropriateness of service delivery. It comes as no surprise that as a general rule 80% of the physicians act appropriately and 20% do not. When the 20% are addressed, 80% will correct their practice and act appropriately leaving 4% to deal with. This 4% can be dealt with in many ways and their reasoning for their acts can vary. They may act inappropriately because they do not know better and they can be educated. They may act inappropriately because they firmly believe that what they do is correct and again they can be educated. A small percentage can not be educated or made to act in an appropriate manner and unfortunately they are not destined a players in a system.
    Controlling costs from the bottom up has to include the up and a significant percentage is the service provided at the institutional level. More than twice as much as is paid to professionals is paid to institutions. An integrated approach to cost containment has to apply and controlling one segment and not another is an error that must be avoided.

  2. This clever piece of commentary highlights a growing trend in healthcare today: transparency. Information regarding hospital process quality and patient satisfaction is readily available on the internet. The more enlightened hospitals are providing procedure cost information.
    As consumers increasingly select their health care providers on the basis of cost and quality, providers will increasingly compete on these factors. Competitive success will require development of a solid quality management foundation encompasing:
    Strategy: including a clear linkage of quality and patient safety to the organizational strategy and a Board-driven imperative to achieve quality goals.
    Infrastructure: incorporating effective quality management technology, EMR and physician order entry, evidence based care development tools and methodologies, and quality performance metrics and monitoring technology that enables “real time” information.
    Process: including concurrent intervention, the ability to identify key quality performance “gaps,” and performance improvement tools and methodologies to effectively eliminate quality issues.
    Organization: providing sufficient number and quality of human resources to deliver quality planning and management leadership, adequate informatics management, effective evidence based care and physician order set development, performance improvement activity, and accredition planning to stay “survey ready every day.”
    Culture: where a passion for quality and patient safety is embedded throughout the delivery system and leaders are incented to achieve aggressive quality improvement goals.
    My firm has assisted a number of progressive health systems to achieve such a foundation, and to develop truly World Class Quality.

  3. I’m totally new to the “blog” area, but what has brought me here is twofold, first I am trying to understand, in depth, revenue cycle and secondly, I am looking for “stars” in this area. I have a company whose goal is to be number uno in healthcare consulting, they are already very well respected and getting close, who is looking to hire these people as partners to their venture. I need senior people 7+ years, with advance degrees and have been published for starters.
    Can anyone HELP me?????

  4. What the @#$!?
    1. Why is it that when you call your attorney, or any other professional for that matter, you get billed for the time spent during the phone conversation for every minute, but when a physician gets called they don’t get a dime?
    2. Why is it that when you have a flat on your car at 3 AM with no spare, the guy that comes to fix your flat gets paid more than a pediatrician who goes for an emergency at the hospital at the same time? How much time and money was spent on the flat changer’s education?
    3. Why do people feel like they can bother their doctor in the middle of the night to ask a question? If it is serious enough to call at 3AM then it’s serious enough to go to the ER.
    4. Why does an insurance company have someone with no college education or medical background determine what diagnosis goes with what procedures a physician performed?
    5. How can one insurance company pay $112.00 for a particular code and another pay $46.00 for the same code?
    6. Why does Medicare pay almost three times as much as Medicaid for the exact same procedure? Are younger human lives worth a third of a mature human beings life?
    7. Why can’t insurance companies have a magnetic strip on their insurance cards that can be swiped at the Dr’s office to enable us to see the patient’s eligibility and the conditions of their insurance? Like a credit card. The way it is now, a receptionist has to call the insurance company (average call lasting 10 to 15 minutes; it’s like calling the phone company ) to get this info because they won’t put this info on their website either. Why?
    8. What incentive is there to be a good physician, since you get paid the same as a bad physician by the insurance companies? The big insurance in this country has taken capitalism completely out of healthcare.
    9. Other than catastrophic, why do people feel they need insurance? By the time you add the costs of copays, deductibles, and your annual insurance premiums, the total is much higher than you pay if you paid for your physician office vistits + catastrophic insurance. These so called health discounts that the insurance companies are starting to offer, are nothing more than the discount you would receive for paying cash anyway. Just another scam they came up with to rob the American public. Why not just start your own health savings plan and eliminate the $300,000,000.00 man at United Healthcare.
    10. How did the CEO of United Healthcare make $300 million last year? Do you think somebody got screwed? Who? Someone either overpaid their premiums or physicians where underpaid.
    11. If the body shop that fixes your car has a transposed part number on one of the parts, does the insurance company deny the claim? Why not, they will if a physician’s office makes a mistake? Why is it so different with auto insurance? Maybe physicians should start giving estimates.
    12. How can insurance companies get away with all these subsidiaries insurance companies; each with different
    payer ID’s, with no clear indication who is responsible? On the card it will have the name of every company that is involved, adding to the confusion of who is going to pay.
    13. If a patient has paid their premium, there should be no excuse for any unpaid claim, period.
    14. Why is it a physician’s responsibility to prove to the insurance company they are owed money each time a patient has a procedure performed?
    15. According to Forbes, George Lucas makes $250 million a year. Oprah Winfrey makes $150 million. Bruce Willis? $70 million. They’re all in the entertainment business, just like Rodriguez ($25.2 million), but most stories about them don’t mention those figures. Did you know that Martin Lawrence — Martin Lawrence! — makes $33 million? Narrowing the focus to sports figures, we find race car driver Michael Schumacher ($59 million), golfer Tiger Woods ($53 million) and boxer Mike Tyson ($48 million) How many lives did these people save? Ever hear of any Dr. making this kind of jack?
    16. When are people going to realize that healthcare is not a birth right, just like food and shelter is not a birth right. Or at least it wasn’t until Kennedy. Take care of yourself or die, worked for many years. If we want to help the less fortunate, we can, but don’t mandate the help. Once mandated it is no longer charity and the less fortunate feel it is owed them, and it’s not. Maybe when people see their kids starving, they’ll get off their couch and go to work.
    17. Who is going to pay for all these social programs the government has mandated, considering that responsible people don’t start breeding until their late twenties early thirty’s, and the population that relies on these social programs have five kids by the time they are twenty five or younger? Do the MATH!!!!

  5. I hate to say it, but it seems the only way for today’s physicians to get any respect and not deal with the hassle of paperwork is to demand cash upfront; deal with the patient and not the insurance company. Maybe offer to accept the Medicare rates from patients, since that is all that most physicians will get paid in the end in most cases. Too bad we can’t go back to when insurance companies did not exist and Medicare was just a thought.
    By the way, great post Mr. Milleson….it is now circulating around DC to all the GI docs and might eventually land in the “inbox” of someone at CMS if it has not already:)

  6. I think it’s great that Medicare patients will be able to see how paltry Medicare reimbursement to physicians is. In my experience, when this has occurred, patients are usually quite surprised that we get paid as little by Medicare as we do, and many of them have commented about how unfair it is. However, I’m not sure why Medicare patients would feel compelled to shop around for the lowest prices, or why they’d want to choose the lowest prices anyway.

  7. Sonny,
    how do you recommend we train new doctors? They HAVE to work on somebody, or else they will always be “new” doctors.
    Remember, even moonlighting residents are SUPERVISED by attendings. As long as they are supervised, its not a problem.

  8. Too funny!! For McFlappin’, nothing but the best; just call Roto-Rooter.

  9. I have recently been made aware that unsupervised residents are moonlighting in emergency departments across the country, in breach of the work-week hours restriction. This is putting the public at risk in the hands of not just fatigued, but relatively inexperienced physicians, sometimes just 1 or 2 years out of medical school.
    The notorious American College of Emergency Physicians (ACEP) deliberately omitted to even mention this travesty (unsupervised residents masquerading as ED attending physicians) in their recent National Report Card. Instead, ACEP proceeded to condemn over 16,000 career emergency physicians for not having the ‘right’ feathers in their hats.
    Arbitrarily, ACEP made the announcement that there is a new (but unproven) Gold Standard of emergency physician. Such announcements are directed towards extracting more taxpayers money towards Mickey Mouse training programs while neglecting proper care of the ED patient.
    If you want to control healthcare costs from the bottom up, or rather, from the front line, get the lawmakers to promote equal recognition of experienced emergency physicians who have never been sued and do a damned good job.
    Who do you want treating your child with meningitis, your spouse with a heart attack, or your parent with a hemorrhagic stroke? The green-gilled resident or new graduate, with all the ‘right’ feathers, or the career emergency physician with over 20,000 hours of training and a great ‘gut-feel’ for most clinical scenarios, and yet to have been sued?
    ACEP is promoting monopoly and restraint of trade and they need to be stopped.

  10. > Should you wish to decline anesthesia,
    > we will provide you with a set of headphones…
    I should think it would be the medical staff in need of headphones and loud music.
    This is hilarious!

  11. The comment above reminded me of this,
    “You have broken the Fifth Rule.
    You have taken yourself too seriously.
    What are the other rules? There are no other rules.”
    – Pierre Dupont, Dupont Industries
    It also reminded me of that old saying. “I want to die in my sleep like grandpa, not awake and screaming in terror like his passengers.” Consumerism is a great sop to those too oblivious to understand the real root causes of our impending healthcare crisis.

  12. You missed your calling as a comedian, Professor Millenson. But while the awkward transition from a healthcare system in which care decisions are driven by physicians and bureaucrats to one in which the consumer is king will, at times, be as laughable as a fawn finding her legs, a world in which care can be driven by supply systems “without regard to…patients’ preferences” is downright scary. [1]
    Thanfully for you and me, most prefer humor to terror in their health policy commentary.
    Trapier K. Michael
    Harvard School of Public Health
    SM Candidate in Health Policy and Management
    [1] J.C. Robinson, “Managed Consumerism In Health Care,” Health Affairs 24, No6 (2005): 1478-1489. http://content.healthaffairs.org/cgi/content/abstract/24/6/1478